This week's essays will further analyze the interrelationship between the International Legal Business Environment and the National Legal Business Environment. Today, we look at online gambling and how the rise of e-commerce limits the government's ability to control global business.
What happened? The exponential rise of online gambling in Indonesia.
The exponential rise of online gambling in Indonesia exemplifies the challenges faced by governments worldwide in regulating the digital economy, in partcular intangible products like services.
Recent data from Indonesia's Financial Transaction Reports and Analysis Centre (PPATK) reveals a staggering increase in gambling-related transactions, from USD 3.8 billion in 2021 to USD 21.8 billion in 2023, with the first quarter of 2024 already reaching USD 6.7 billion. Source: https://tinyurl.com/mutu9dfc
This growth impacts Indonesia and highlights global issues in e-commerce regulation in the international legal business environment.
National governments are limited to controlling global/virtual issues such as online gambling/ e-commerce.
While online gambling is illegal in Indonesia, the virtual nature of these transactions makes effective control and regulation extremely difficult (besides controlling human vices in general).
This challenge extends beyond gambling to various forms of digital commerce, illustrating a broader problem in the international legal business environment. For instance, the ease with which consumers can bypass blocked websites using VPNs complicates regulatory efforts, creating significant hurdles for governments attempting to maintain law and order in the digital metaverse.
The "lawlessness" of e-commerce impacts State revenues.
Crucially, the inability to regulate online transactions impedes governments' capacity to tax these activities, resulting in substantial revenue losses. The Indonesian case is mirrored globally, with countries like the United States and the United Kingdom struggling to adapt their legal frameworks to the realities of digital commerce.
Key Takeaway: The real issue is the loss of government control over global business.
The real global issue is the erosion of governmental control over digital transactions and the subsequent loss of tax revenue due to e-commerce and profit-shifting practices. This challenge demands a coordinated international response to create a more robust legal framework for the digital business environment.